Indian equity markets extended their sharp decline on Monday, with benchmark indices deepening a selloff that has wiped out nearly ₹17 lakh crore in market value over six trading sessions. The BSE Sensex dropped over 500 points to hit an intraday low of 83,043.45, while the NSE Nifty 50 slid over 140 points, falling below the 25,550 mark during early trade.

Market Performance Overview

The scale of the market decline has been significant across both major indices:

From a closing high of 85,762.01 on January 2, the Sensex has shed more than 2,718 points, while the Nifty has declined approximately 3% over the same period. The market capitalisation of all listed BSE companies has fallen by ₹16.85 lakh crore in six days to ₹464.39 lakh crore.

Key Factors Behind the Selloff

Trump Tariffs and U.S.-India Trade Uncertainty

Uncertainty over U.S. tariff policies has emerged as a primary concern for investors. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that "the market has turned distinctly weak, weighed down by a series of India-specific and global geopolitical events. The drama surrounding the US-India trade deal is getting murkier with strange remarks from the US administration."

The absence of an anticipated U.S. Supreme Court ruling on Trump tariffs has prolonged policy uncertainty. Vijayakumar explained that "an expected ruling on Trump tariffs from the US Supreme Court on Friday didn't materialise; there is no clarity on when this will happen. Yet it can happen any time and, therefore, investors have to be watchful of the development on this front."

Persistent Foreign Institutional Investor Selling

Foreign institutional investors have maintained their selling pressure, with outflows worth ₹3,769 crore recorded on Friday, January 9. This marked the sixth consecutive session of FII selling after a brief pause on January 2. The sustained withdrawal of foreign capital has significantly impacted market liquidity and amplified losses amid global uncertainty.

Global Market Headwinds

International market conditions have added to the cautious sentiment on Indian bourses. Concerns emerged around Federal Reserve independence after Fed Chair Jerome Powell revealed that the Trump administration had threatened him with criminal indictment. This development unsettled global investors and contributed to risk-off sentiment.

Market Volatility and Outlook

The India VIX has spiked, indicating heightened volatility ahead. Vijayakumar highlighted that "geopolitical developments in Venezuela, the crisis in Iran and Trump's threats regarding Greenland are also being viewed by the markets with concern. This has spiked the India volatility index India VIX indicating big volatility ahead."

The current decline represents the market's worst weekly performance in more than three months, reflecting broad-based investor unease. The combination of domestic policy uncertainty, persistent foreign selling, and global geopolitical tensions has created a challenging environment for Indian equities, with investors remaining cautious about near-term market direction.

Indian equity benchmarks extended their decline on Monday, with both the Sensex and Nifty falling approximately 0.5% as investors engaged in profit booking amid multiple headwinds. The market weakness intensified investor focus on whether key support levels can withstand persistent foreign fund selling and rising volatility.

Market Performance

By 9:50 a.m., the equity indices showed significant weakness across the board:

Key Factors Behind Market Decline

Several interconnected factors contributed to the market weakness observed during Monday's trading session.

Weak Global Cues

Wall Street futures were trading up to 0.5% lower, indicating a weak opening for US markets. This negative sentiment from global markets created additional pressure on Indian equities, as investors remained cautious about international market developments.

Rising Volatility

The India VIX, commonly referred to as the fear gauge, surged significantly during the session:

This substantial increase in the volatility index reflected heightened uncertainty and risk aversion among market participants.

Currency Market Pressure

The Indian rupee faced additional pressure, depreciating 5 paise to 90.23 against the US dollar in early trade. The currency weakness was driven by multiple factors including rising crude oil prices and continued outflow of foreign funds.

According to forex traders, the volatile geopolitical situation and concerns over potential US tariffs on Indian exports have fueled the selling of Indian stocks by foreign institutional investors. Market participants are now awaiting cues from macroeconomic data scheduled for release this week to gauge future market direction.

Market Outlook

The combination of weak global sentiment, rising domestic volatility, and currency depreciation has created a challenging environment for Indian equities. Investors remain focused on whether key support levels can hold amid the current market pressures and ongoing foreign fund outflows.